the ex-technocrat prime minister
of Greece says public finances face collapse.
Greece’s public finances could
collapse as early as next
month, leaving salaries
and pensions unpaid unless
a stable government emerges
from the June 17 election, according to Lucas Papademos, the technocrat prime
minister who left office after this month’s inconclusive vote.
Mr Papademos warned that conditions were deteriorating faster than expected with cash flow likely to turn negative in early June amid a
sharp fall in tax revenues and a loosening of
spending controls during two back-to-back election campaigns.
Mounting anxiety that Greece is
headed for further political instability and a
possible exit from the euro has prompted
many Greeks to postpone making tax payments, and has also accelerated outflows of deposits from local banks.
Athens bankers estimate that more than €3bn of cash withdrawn
since the May 6 election
has been stashed in safe-deposit
boxes and under mattresses
in case the country is forced
to readopt the drachma.
The finance ministry has halted
repayment of value-added tax to Greek exporters, and slashed public investment spending by more than 20 per cent in the first four months.
Transfers to the health ministry to pay debts owed to hospital suppliers and
pharmacies have been temporarily suspended, obliging patients to
pay the full cost of
prescription drugs for the first time.
The struggling state electricity
utility PPC has received a €250m special payment from the budget to help cover a
widening deficit. The
utility has been hit by a sharp
rise in non-payments of household electricity bills after the finance ministry imposed an extra “solidarity
tax” last year that was added
to the bills.
Understatement of the Month
“The situation is getting
out of hand,” said a private
sector economist. Really? It seems to me things got out of hand long ago.
Capital Controls as Money Pours into
While some stuff money in mattresses, others pour money into Swiss Francs. In response Swiss eye
The Swiss National
Bank is considering imposing capital controls on foreign deposits if Greece leaves the euro, as the
franc comes under heavy demand from investors seeking a haven in Europe.
The Swiss franc has come under
increasing pressure since
the Greek elections at the start of the month. Currency traders have reported unusually high levels of franc buying in response to the problems in the
eurozone, which has seen the euro slide to its lowest level
in nearly two years.
ourselves for turbulent times,” Mr Thomas
Jordan [head of the Swiss
central bank] said in an
interview with SonntagsZeitung,
a Swiss newspaper.
“The situation has become worse
in the past few weeks and
the outlook has become much more uncertain. We’re seeing a clear upward pressure on the
franc,” he told the
are looking for a safe haven. For many, that includes the franc.”
have said this before numerous times but it is worth
repeating: If you have
money in Greek, Spanish,
or Portuguese banks, get it out now.